Car dealership rules face scrap-heap

The special EU competition regime for car distribution is not going to be renewed when it expires in 2010, according to European automotive industry sources. A European Commission evaluation of the so-called block exemption, which was most recently modified in 2002 so that dealers and consumers could enjoy greater market freedom, is due out on 28 May.

Unconcerned

Car manufacturers, who were the principal beneficiaries when the first block exemption was introduced in 1985, are unconcerned about its demise. The exceptional arrangements that they were initially granted by the exemption – such as the right to impose tight conditions on their links with dealers – have been progressively attenuated by successive amendments to the regime. Manufacturers strongly opposed the 2002 amendment, which permitted dealers to sell more than one brand of car and to use alternative suppliers for repairs and spare parts, as well as making it easier for customers to buy cars across the EU’s internal borders.

Marc Greven, the legal affairs director of the European Automobile Manufacturers’ Association (ACEA), said that “the same results would be reached” if the exemption was dropped. Its regulations, he argued, would be “dealt with elsewhere”, not only in the general vertical restraints regulation and EU competition rules covering anti-competitive agreements (article 81) and the abuse of dominant positions (article 82), but also in more specific type-approval legislation.

Sources in the spare parts and repair market are less optimistic. The European Campaign for the Freedom of the Automotive Parts and Repair Market (ECAR) argues that the Commission’s concerns on distribution “still hold true today” and will do so “for the next decade”. It says the 2002 block exemption provides for “greater clarity”, and helped “to encourage investments, and to effectively protect smaller players faced with the market power of vehicle manufacturers”.

Unequal play

Jacopo Moccia, director of the European Council for Motor Trades and Repairs (CECRA), expressed concerns that contractual security for car dealers would be reduced by removing the block exemption, which provides for a two-year period for terminating contracts. He is concerned about the unequal play of forces between dealers and powerful manufacturers. Already, he said, some manufacturers are using this power to end contracts in questionable fashion with entire networks of dealers.

Guidelines

Lesley Ainsworth, a partner in the London office of law firm Lovells, said it was possible that removing the exemption could prejudice dealers.

She said the Commission should issue guidelines if it opted to scrap the block exemption.